New England Biz Law Update
The 3rd U.S. Circuit Court of Appeals has vacated a portion of an NLRB order requiring Starbucks to compensate two allegedly wrongfully terminated employees for “all direct or foreseeable pecuniary harms” stemming from alleged unfair labor practices.
The court ruled that this remedy exceeded the NLRB’s authority under the National Labor Relations Act (NLRA).
The case originated in response to Starbucks’ alleged violations of the NLRA, including the termination of two employees engaged in union organizing activities.
In 2021, an NLRB administrative law judge ruled in favor of the employees, ordering Starbucks to reinstate them and provide back pay and compensation for interim expenses. The Board expanded this remedy in line with its 2022 Thryv, Inc. decision, requiring employers to cover all direct or foreseeable pecuniary harms resulting from unfair labor practices.
Starbucks challenged this expanded remedy, arguing that it fell outside the Board’s authority under the NLRA, which limits the NLRB to equitable remedies such as reinstatement and back pay.
The 3rd Circuit sided with Starbucks, stating that the NLRA permits the NLRB to order equitable relief but does not authorize damages akin to those awarded in civil lawsuits.
The court said that monetary awards under the NLRA must be limited to back pay and similar remedies. It vacated the portion of the order involving compensation for pecuniary harms and remanded the case for further proceedings.
The court also addressed Starbucks’ constitutional challenge to the removal protections for administrative law judges but declined to rule on the merits, citing a lack of jurisdiction. Starbucks had failed to raise this argument before the NLRB, precluding judicial review.
Implications for employers
The decision restricts the NLRB’s ability to impose compensatory damages for pecuniary harms, reinforcing that the Board’s authority is limited to equitable remedies.
It is important to be aware that, while the decision challenges the broad remedial authority established in Thryv, its impact remains geographically limited. The NLRB’s approach to make-whole remedies will likely persist outside the 3rd Circuit’s jurisdiction unless additional courts adopt similar interpretations.
Further, employers should raise all potential defenses before the NLRB to preserve them for judicial review. The court’s refusal to address Starbucks’ constitutional challenge underscores the importance of procedural compliance.
The decision highlights a significant limitation on the NLRB’s authority, signaling a potential shift in how remedies for unfair labor practices are applied. Employers should monitor developments closely as the Board and other courts respond to it.
